# Plug Power Inc: Form 10-Q for the period ended Mar 31, 2023

- Company: [Plug Power Inc](/companies/plug.md) (CIK 1093691)
- Form: 10-Q
- Filed: 2023-05-09
- Accepted by EDGAR: May 9, 2023, 20:03 ET
- Period: 2023-03-31
- Accession: 0001558370-23-008801
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1093691/000155837023008801/plug-20230331x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1093691/000155837023008801/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-01-01 to 2023-03-31 | $210.3m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2023-01-01 to 2023-03-31 | $279.7m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2023-01-01 to 2023-03-31 | −$69.4m | us-gaap:GrossProfit |
| Research and development | 3 months, 2023-01-01 to 2023-03-31 | $26.5m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2023-01-01 to 2023-03-31 | $104.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-01-01 to 2023-03-31 | −$209.8m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-01-01 to 2023-03-31 | $10.7m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-01-01 to 2023-03-31 | −$1.3m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-01-01 to 2023-03-31 | −$206.6m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-01-01 to 2023-03-31 | −$0.35 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-01-01 to 2023-03-31 | −$0.35 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-01-01 to 2023-03-31 | 589,205,165 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2023-01-01 to 2023-03-31 | −$276.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2023-01-01 to 2023-03-31 | $168.6m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2023-03-31 | $474.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-03-31 | $2.98bn | us-gaap:AssetsCurrent |
| Total assets | at 2023-03-31 | $5.65bn | us-gaap:Assets |
| Current liabilities | at 2023-03-31 | $677.5m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-03-31 | $1.73bn | us-gaap:Liabilities |
| Long-term debt | at 2023-03-31 | $9.0m | us-gaap:LongTermDebt |
| Current portion of debt | at 2023-03-31 | $5.2m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2023-03-31 | $3.92bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 65,997 characters.

The following discussion should be read in conjunction with our accompanying unaudited interim condensed consolidated financial statements and notes thereto included within this Quarterly Report on Form 10-Q, and our audited and notes thereto included in our 2022 Form 10-K. In addition to historical information, this Quarterly Report on Form 10-Q and the following discussion contain statements that are not historical facts and are considered forward-looking within the meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act. These forward-looking statements contain projections of our future results of operations or of our financial position or state other forward-looking information. In some cases, you can identify these statements by forward-looking words such as “believe,” “could,” “continue,” “estimate,” “expect,” “intend,” “may,” “should,” “will,” “would,” “plan,” “project” or the negative of such words or other similar words or phrases. We believe that it is important to communicate our future expectations to our investors. However, there may be events in the future that we are not able to accurately predict or control and that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Investors are cautioned not to unduly rely on forward-looking statements because they involve risks and uncertainties, and actual results may differ materially from those discussed as a result of various factors, including, but not limited to:

- the risk that we continue to incur losses and might never achieve or maintain profitability;
- the risk that we will need to raise additional capital to fund our operations and such capital may not be available to us;
- the risks associated with global economic uncertainty, including inflationary pressures, fluctuating interest rates, bank failure, and supply chain disruptions;
- the risk that we may not be able to expand our business or manage our future growth effectively;
- the risk that delays in or not completing our product development and hydrogen plant construction goals may adversely affect our revenue and profitability;
- the risk that we may be unable to successfully pursue, integrate, or execute upon our new business ventures.
- the risk of dilution to our stockholders and/or stock price should we need to raise additional capital;
- the risk that our lack of extensive experience in manufacturing and marketing of certain of our products may impact our ability to manufacture and market products on a profitable and large-scale commercial basis;
- the risk that unit orders may not ship, be installed and/or converted to revenue, in whole or in part;
- the risk that a loss of one or more of our major customers, or if one of our major customers delays payment of or is unable to pay its receivables, a material adverse effect could result on our financial condition;
- the risk that a sale or issuance of a significant number of shares of stock could depress the market price of our common stock;
- the risk that our convertible senior notes, if settled in cash, could have a material adverse effect on our financial results;
- the risk that our convertible note hedges may affect the value of our convertible senior notes and our common stock;
- the risk that negative publicity related to our business or stock could result in a negative impact on our stock value and profitability;
- the risk of potential losses related to any product liability claims or contract disputes;
- the risk of loss related to an inability to remediate the material weaknesses identified in internal control over financial reporting as of December 31, 2022 and 2021, or inability to otherwise maintain an effective system of internal control over financial reporting;
- our ability to attract and maintain key personnel;
- the risks related to the use of flammable fuels in our products;
- the risk that pending orders may not convert to purchase orders, in whole or in part;
- the cost and timing of developing, marketing, and selling our products;
- the risks involved with participating in joint ventures, including our ability or inability to execute our strategic growth plan through joint ventures;
- our ability to obtain financing arrangements to support the sale or leasing of our products and services to customers;
- our ability to achieve the forecasted revenue and costs on the sale of our products;
- the cost and availability of fuel and fueling infrastructures for our products;
- the risks, liabilities, and costs related to environmental, health, and safety matters;
- the risk of elimination of government subsidies and economic incentives for alternative energy products;
- market acceptance of our products and services;
- our ability to establish and maintain relationships with third parties with respect to product development, manufacturing, distribution, and servicing, and the supply of key product components;
- the cost and availability of components and parts for our products;
- the risk that possible new tariffs could have a material adverse effect on our business;
- our ability to develop commercially viable products;
- our ability to reduce product and manufacturing costs;
- our ability to successfully market, distribute and service our products and services internationally;
- our ability to improve system reliability for our products;
- competitive factors, such as price competition and competition from other traditional and alternative energy companies;
- our ability to protect our intellectual property;
- the risk of dependency on information technology on our operations and the failure of such technology, including failure to effectively prevent, detect, and recover from security compromises or breaches, including cyber-attacks;
- the cost of complying with current and future federal, state and international governmental regulations;
- the expense and resources associated with being subject to legal proceedings and legal compliance;
- the risks associated with past and potential future acquisitions;
- the risks associated with geopolitical instability, including the conflict between Russia and Ukraine and growing tensions between U.S. and China and neighboring regions; and
- the volatility of our stock price.

The risks included here are not exhaustive, and additional factors could adversely affect our business and financial performance, including factors and risks discussed in the section titled “Risk Factors” included under Part I, Item 1A, in our 2022 Form 10-K and supplemented by Part II, Item 1A of this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from these contained in any forward-looking statements. While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. These forward-looking statements speak only as of the date on which the statements were made. Except as may be required by applicable law, we do not undertake or intend to update any forward-looking statements after the date of this Quarterly Report on Form 10-Q.

References in this Quarterly Report on Form 10-Q to “Plug,” the “Company,” “we,” “our” or “us” refer to Plug Power Inc., including as the context requires, its subsidiaries.

### Overview

Plug is facilitating the paradigm shift to an increasingly electrified world by innovating cutting-edge hydrogen and fuel cell solutions. While we continue to develop commercially viable hydrogen and fuel cell product solutions, we have expanded our offerings to support a variety of commercial operations that can be powered with green hydrogen. We provide electrolyzers that allow customers — such as refineries, producers of chemicals, steel, fertilizer and commercial refueling stations — to generate hydrogen on-site. We are focusing our efforts on (a) industrial mobility applications, including electric forklifts and electric industrial vehicles, at multi-shift high volume manufacturing and high throughput distribution sites where we believe our products and services provide a unique combination of productivity, flexibility, and environmental benefits; (b) stationary power systems that will support critical operations, such as data centers, microgrids, and generation facilities, in either a backup power or continuous power role and replace batteries, diesel generators or the grid for telecommunication logistics, transportation, and utility customers; and (c) production of hydrogen. Plug expects to support these products and customers with an ecosystem of vertically integrated products that produce, transport, store and handle, dispense, and use hydrogen for mobility and power applications.

Our current products and services include:

**GenDrive**: GenDrive is our hydrogen fueled Proton Exchange Membrane (“PEM”) fuel cell system, providing power to material handling electric vehicles, including Class 1, 2, 3 and 6 electric forklifts, Automated Guided Vehicles, and ground support equipment.

**GenFuel**: GenFuel is our liquid hydrogen fueling delivery, generation, storage, and dispensing system.

**GenCare**: GenCare is our ongoing “Internet of Things”-based maintenance and on-site service program for GenDrive fuel cell systems, GenSure fuel cell systems, GenFuel hydrogen storage and dispensing products and ProGen fuel cell engines.

**GenSure**: GenSure is our stationary fuel cell solution providing scalable, modular PEM fuel cell power to support the backup and grid-support power requirements of the telecommunications, transportation, and utility sectors; GenSure High Power Fuel Cell Platform will support large scale stationary power and data center markets.

**GenKey**: GenKey is our vertically integrated “turn-key” solution combining either GenDrive or GenSure fuel cell power with GenFuel fuel and GenCare aftermarket service, offering complete simplicity to customers transitioning to fuel cell power.

**ProGen**: ProGen is our fuel cell stack and engine technology currently used globally in mobility and stationary fuel cell systems, and as engines in electric delivery vans. This includes Plug’s membrane electrode assembly, a critical component of the fuel cell stack used in zero-emission fuel cell electric vehicle engines.

**Electrolyzers**: The design and implementation of 5 and 10MW electrolyzer systems that are modular, scalable hydrogen generators optimized for clean hydrogen production. Electrolyzers generate hydrogen from water using electricity and a special membrane and “green” hydrogen is generated by using renewable energy inputs, such as solar or wind power.

**Liquefaction Systems**: Plug’s 15 ton-per-day and 30 ton-per-day liquefiers are engineered for high efficiency, reliability, and operational flexibility — providing consistent liquid hydrogen to customers. This design increases plant reliability and availability while minimizing parasitic losses like heat leak and seal gas losses.

**Cryogenic Equipment:** Engineered equipment including trailers and mobile storage equipment for the distribution of liquified hydrogen, oxygen, argon, nitrogen and other cryogenic gases.

We provide our products and solutions worldwide through our direct sales force, and by leveraging relationships with original equipment manufacturers (“OEMs”) and their dealer networks. We are currently targeting Asia, Australia, Europe, Middle East and North America for expansion in adoption. The European Union (the “EU”) has rolled out ambitious targets for the hydrogen economy as part of the EU strategy for energy integration and we are seeking to execute on our strategy to become one of the European leaders in the hydrogen economy. This includes a targeted account strategy for material handling, securing strategic partnerships with European OEMs, energy companies, utility leaders and accelerating our electrolyzer business. Our global strategy includes leveraging a network of integrators or contract manufacturers. Additionally, we have a joint venture with Niloco Hydrogen Holdings LLC, a wholly-owned subsidiary of Olin named “Hidrogenii”. Plug has been successful with acquisitions, strategic partnerships and joint ventures, and we plan to continue this mix.

Part of our long-term plan includes Plug penetrating the European and Asian hydrogen market, on-road vehicle market, and large-scale stationary market. Plug’s formation of joint ventures with HyVia and AccionaPlug in Europe and SK Plug Hyverse in Asia not only support this goal but are expected to provide us with a more global footprint.

We manufacture our commercially viable products in Latham, New York, Rochester, New York, Slingerlands, New York, Houston, Texas, Lafayette, Indiana, and Spokane, Washington, and support liquid hydrogen production and logistics in Charleston, Tennessee and Kingsland, Georgia.

### Recent Developments

### Cyber-security

In or around March 2023, an unauthorized actor accessed our computer network and executed a ransomware attack, resulting in the encryption of certain of our computer systems, including systems used to store proprietary and confidential data, and exfiltration of limited data sets. Upon detection, we took immediate steps to contain, assess and remediate the incident, including engaging outside legal counsel and external forensic investigators. Necessarily, the Company has incurred costs in addressing the incident, including related to investigation, containment, restoration, and remediation. As a result of the unauthorized access, the Company’s employees experienced interruption of access to the internal network, which created temporary disruption of certain internal operations and automated processes. As of the date of the filing of this Quarterly Report on Form 10-Q, the Company has restored the affected systems and throughout this restoration period the Company’s business remained fully operational with no material disruption. Based on information available to date, we do not believe the ransomware event has had a material impact on our business.

### COVID-19 Update

The COVID-19 pandemic caused significant transportation challenges for global suppliers and while we expect that these challenges will lessen over time, we continue to take proactive steps through our supply chain team to limit the impact of any such challenges on our business and we continue to work closely with our suppliers and transportation vendors to ensure availability of products and implement other cost savings initiatives.

### Inflation, Material Availability and Labor Shortages

Most components essential to our business are generally available from multiple sources; however, we believe there are some component suppliers and manufacturing vendors, particularly those that supply materials in very limited supply worldwide, whose loss to us could have a material adverse effect upon our business and financial condition. We are mitigating these potential risks by introducing alternate system architectures that we expect will allow us to diversify our supply chain with multiple fuel cell, electrolyzer stack and air supply component vendors. In addition, we continue to invest in our supply chain to improve its resilience with a focus on automation, dual sourcing of critical components and localized manufacturing when feasible. We are also working closely with these vendors and other key suppliers on coordinated product introduction plans, product and sales forecasting, strategic inventories, and internal and external manufacturing schedules and levels; however, changes to our products designs or incorrect forecasting could present challenges to those strategies despite best efforts in leveraging supplier relationship and capabilities. Recent cost pressures from global energy prices and inflation have negatively impacted access to our key raw materials. In cases where we have single sourced suppliers (typically due to new technology and products) or there have been worldwide shortages due to global demand, we have worked to engineer alternatives in our product design or develop new supply sources while covering short- and medium-term risks with supply contracts, building up inventory, and development partnerships. However, if we, or the industry or economy at large, were to experience a recession and the demand for our product decreases, then we may have a large stock of pre-purchased inventory that could be unused and aging for a period of time.

In January 2023, the Company entered into a strategic partnership with Johnson Matthey Hydrogen Technologies Limited, a subsidiary of Johnson Matthey PLC and a global leader in sustainable technologies (“JM”), pursuant to which JM will supply the Company catalyst coated membrane for use in the production of fuel cells as well as catalysts and membranes for use in the production of electrolyzers. In addition, the Company and JM intend to develop their existing and new technology and commercial products and co-invest in a manufacturing facility in the United States.

Additionally, we have observed an increasingly competitive labor market. Tight labor markets have resulted in labor inflation and longer times to fill open positions. Increased employee turnover, changes in the availability of our workers as well as labor shortages in our supply chain have resulted in, and could continue to result in, increased costs which could negatively affect our component or raw material purchasing abilities, and, in turn, our financial condition, results of operations, or cash flows.

### Results of Operations

Our primary sources of revenue are from sales of fuel cell systems, related infrastructure and equipment, services performed on fuel cell systems and related infrastructure, Power Purchase Agreements (PPAs), and fuel delivered to customers. A certain portion of our sales result from acquisitions in legacy markets, which we are working to transition to renewable solutions. Revenue from sales of fuel cell systems, related infrastructure and equipment represents sales of our GenDrive units, GenSure stationary backup power units, cryogenic stationary and on road storage, electrolyzers and hydrogen fueling infrastructure. Revenue from services performed on fuel cell systems and related infrastructure represents revenue earned on our service and maintenance contracts and sales of spare parts. Revenue from PPAs primarily represents payments received from customers who make monthly payments to access the Company’s GenKey solution. Revenue associated with fuel delivered to customers represents the sale of hydrogen to customers that has been purchased by the Company from a third party or generated on site.

#### Provision for Common Stock Warrants

On August 24, 2022, the Company and Amazon entered into the 2022 Transaction Agreement, under which the Company concurrently issued to Amazon.com NV Investment Holdings LLC, a wholly owned subsidiary of Amazon, the Amazon Warrant, to acquire the Amazon Warrant Shares, subject to certain vesting events described below. The Company and Amazon entered into the 2022 Transaction Agreement in connection with a concurrent commercial arrangement under which Amazon agreed to purchase hydrogen fuel from the Company through August 24, 2029.

In 2017, in separate transactions, the Company issued to each of Amazon.com NV Investment Holdings LLC and Walmart, Inc. (“Walmart”) warrants to purchase shares of the Company’s common stock. The Company recorded a portion of the estimated fair value of the warrants as a reduction of revenue based upon the projected number of shares of common stock expected to vest under the warrants, the proportion of purchases by Amazon, Walmart and their affiliates within the period relative to the aggregate purchase levels required for vesting of the respective warrants, and the then-current fair value of the warrants. For the third tranche of the shares under Walmart’s warrant, the exercise price will be determined once the second tranche vests. For the third tranche of the Amazon Warrant Shares, see below for the exercise price and measurement dates used.

The amount of provision for common stock warrants recorded as a reduction of revenue for the three months ended March 31, 2023 and 2022, respectively, is shown in the table below (in thousands):

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ Three months ended March 31, 2023 | ​ | ​ ​ 2022 |
| --- | --- | ---: | --- | ---: |
| Sales of fuel cell systems, related infrastructure and equipment | ​ | $(434) | ​ | $(17) |
| Services performed on fuel cell systems and related infrastructure | ​ | (374) | ​ | (150) |
| Power purchase agreements | ​ | (7,185) | ​ | (974) |
| Fuel delivered to customers | ​ | (6,182) | ​ | (711) |
| Total | ​ | $(14,175) | ​ | $(1,852) |

Net revenue, cost of revenue, gross profit (loss) and gross margin (loss) percentage for the three months ended March 31, 2023 and 2022 were as follows (in thousands):

| ​ ​ ​ ​ ​ ​ For the period ended March 31, 2023: | ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ Three Months Ended ​ March 31, ​ ​ Net Revenue ​ ​ | ​ ​ ​ | ​ ​ ​ ​ Cost of Revenue ​ ​ | ​ ​ ​ | ​ ​ ​ ​ Gross Profit/(Loss) ​ ​ | ​ ​ ​ | ​ ​ ​ ​ ​ Gross ​ Margin ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Sales of equipment, related infrastructure and other | ​ | $182,094 | ​ | $158,320 | ​ | $23,774 |  | 13.1% |
| Services performed on fuel cell systems and related infrastructure | ​ | 9,097 | ​ | 12,221 | ​ | (3,124) |  | (34.3)% |
| Provision for loss contracts related to service | ​ | ​ — | ​ | ​ 6,889 | ​ | ​ (6,889) | ​ | N/A ​ |
| Power purchase agreements | ​ | 7,937 | ​ | 46,816 | ​ | (38,879) |  | (489.8)% |
| Fuel delivered to customers and related equipment | ​ | 10,142 | ​ | 54,501 | ​ | (44,359) |  | (437.4)% |
| Other | ​ | 1,016 | ​ | 935 | ​ | 81 |  | 8.0% |
| Total | ​ | $210,286 | ​ | $279,682 | ​ | $(69,396) |  | (33.0)% |
| **For the period ended March 31, 2022:** | **​** | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Sales of equipment, related infrastructure and other | ​ | $108,847 | ​ | $88,828 | ​ | $20,019 |  | 18.4% |
| Services performed on fuel cell systems and related infrastructure | ​ | 8,240 | ​ | 13,875 | ​ | (5,635) |  | (68.4)% |
| Provision for loss contracts related to service | ​ | ​ — | ​ | ​ 2,048 | ​ | ​ (2,048) | ​ | N/A ​ |
| Power purchase agreements | ​ | 10,037 | ​ | 31,753 | ​ | (21,716) |  | (216.4)% |
| Fuel delivered to customers and related equipment | ​ | 13,429 | ​ | 39,272 | ​ | (25,843) |  | (192.5)% |
| Other | ​ | 251 | ​ | 377 | ​ | (126) |  | (50.2)% |
| Total | ​ | $140,804 | ​ | $176,153 | ​ | $(35,349) |  | (25.1)% |

### Net Revenue

*Revenue –* s*ales of equipment, related infrastructure and other.* Revenue from sales of equipment, related infrastructure and other represents revenue from the sale of our fuel cells, such as GenDrive units and GenSure stationary backup power units, as well as hydrogen fueling infrastructure referred to at the site level as hydrogen installations, electrolyzer stacks and systems, and other equipment such as liquefiers and cryogenic storage equipment. Revenue from sales of equipment, related infrastructure and other for the three months ended March 31, 2023 increased $73.2 million, or 67.3%, to $182.1 million from $108.9 million for the three months ended March 31, 2022 primarily due to increases in revenue related to hydrogen site installations, liquefiers, cryogenic equipment, and electrolyzer stacks and systems. The increase in hydrogen infrastructure revenue of $21.8 million was due to 14 hydrogen site installations for the three months ended March 31, 2023 compared to seven for the three months ended March 31, 2022. The increase in the revenue related to cryogenic storage equipment and liquefiers of $38.4 million was due to an increase in sales of liquefiers, as well as an increase in revenue of $11.1 million due to the acquisition of CIS in which there was no revenue recognized in the first quarter of 2022. Revenue related to electrolyzers increased $36.0 million, which was due to increased volume of 62 one megawatt equivalent units sold for the three months ended March 31, 2023 compared to 2 one megawatt equivalent units sold for the three months ended March 31, 2022. Partially offsetting these increases was a decrease in revenue related to GenDrives of $8.3 million, as the number of units decreased from 1,229 for the three months ended March 31, 2022 to 1,035 for the three months ended March 31, 2023 due to timing of site deployments, as well as a decrease of $14.2 million related to the sales of engineered oil and gas equipment from an acquisition that are not expected to continue beyond current commitments. Additionally, there was a provision for common stock warrants of $0.4 million and $17 thousand for the three months ended March 31, 2023 and 2022, respectively.

*Revenue – services performed on fuel cell systems and related infrastructure.* Revenue from services performed on fuel cell systems and related infrastructure represents revenue earned primarily on our service and maintenance contracts, as well as sales of spare parts. At March 31, 2023, there were 20,154 fuel cell units and 95 hydrogen installations under extended maintenance contracts, an increase from 19,409 fuel cell units and 84 hydrogen installations at March 31,

2022\. Revenue from services performed on fuel cell systems and related infrastructure for the three months ended March 31, 2023 increased $0.9 million, or 10.4%, to $9.1 million as compared to $8.2 million for the three months ended March 31, 2022. The increase in revenue from services performed on fuel cell systems and related infrastructure for the three months ended March 31, 2023 compared to 2022 was primarily related to our expanding customer base and growth within our current customer base.

*Revenue – Power Purchase Agreements.* Revenue from PPAs represents payments received from customers for power generated through the provision of equipment and service. At March 31, 2023, there were 117 GenKey sites associated with PPAs, as compared to 77 at March 31, 2022. Revenue from PPAs for the three months ended March 31, 2023 decreased $2.1 million, or 20.9%, to $7.9 million from $10.0 million for the three months ended March 31, 2022. The decrease in revenue was primarily due to an increase in provision for common stock warrants, which went from $1.0 million for the three months ended March 31, 2022 to $7.2 million for the three months ended March 31, 2023. Partially offsetting the increase in provision for common stock warrants was an increase in revenue from PPAs for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022 primarily attributable to the new sites for existing customers and new customers accessing the PPA solution. All of the new PPA sites in the first quarter of 2023 were not deployed until late in the quarter; therefore, the full impact on revenue has yet to be realized.

*Revenue – fuel delivered to customers and related equipment*. Revenue associated with fuel delivered to customers and related equipment represents the sale of hydrogen to customers that has been purchased by the Company from a third party or generated on site. Revenue associated with fuel delivered to customers for the three months ended March 31, 2023 decreased $3.3 million, or 24.5%, to $10.1 million from $13.4 million for the three months ended March 31, 2022. The decrease in revenue was primarily due to an increase in provision for common stock warrants, which went from $0.7 million for the three months ended March 31, 2022 to $6.2 million for the three months ended March 31, 2023. Partially offsetting the increase in provision for common stock warrants was an increase in revenue due to an increase in the number of sites with fuel contracts from 159 as of March 31, 2022 to 210 as of March 31, 2023. All of the new fuel sites in the first quarter of 2023 were not deployed until late in the quarter; therefore, the full impact on revenue has yet to be realized.

### Cost of Revenue

*Cost of revenue – sales of equipment, related infrastructure and other.* Cost of revenue from sales of equipment, related infrastructure and other includes direct materials, labor costs, and allocated overhead costs related to the manufacture of our fuel cells such as GenDrive units and GenSure stationary backup power units, as well as hydrogen fueling infrastructure referred to at the site level as hydrogen installations, electrolyzer stacks and systems, and other equipment such as cryogenic storage equipment and liquefiers. Cost of revenue from sales of fuel cell systems, related infrastructure and equipment for the three months ended March 31, 2023 increased 78.2%, or $69.5 million, to $158.3 million, compared to $88.8 million for the three months ended March 31, 2022. The increase in hydrogen infrastructure cost of revenue of $13.8 million was due to 14 hydrogen site installations for the three months ended March 31, 2023 compared to seven for the three months ended March 31, 2022. The increase in cryogenic storage equipment of $31.0 million was due to an increase in costs related to the sales of liquefiers, as well as an increase in the cost of revenue of $10.0 million due to the acquisition of CIS in which there were no costs of revenue recognized in the first quarter of 2022. The cost of revenue related to electrolyzer stacks and systems increased $32.8 million, which was due to 62 one megawatt equivalent units sold for the three months ended March 31, 2023 compared to 2 one megawatt equivalent units sold for the three months ended March 31, 2022. The cost of revenue related to GenDrives increased $4.9 million, as the number of units decreased from 1,229 for the three months ended March 31, 2022 to 1,035 for the three months ended March 31, 2023. Partially offsetting these increases is a decrease of $12.9 million related to the legacy oil and gas contracts. Gross margin decreased to 13.1% for the three months ended March 31, 2023, compared to 18.4% for the three months ended March 31, 2022. The decrease in gross margin was primarily due to ramp up of costs on new product offerings for high power stationary units and electrolyzers as well as an increase in the provision for common stock warrants. The provision for common stock warrants was $0.4 million and $17 thousand for the three months ended March 31, 2023 and 2022, respectively.

*Cost of revenue – services performed on fuel cell systems and related infrastructure*. Cost of revenue from services performed on fuel cell systems and related infrastructure includes the labor, material costs and allocated overhead costs incurred for our product service and hydrogen site maintenance contracts and spare parts. At March 31, 2023, there were 20,154 fuel cell units and 95 hydrogen installations under extended maintenance contracts, an increase from 19,409 fuel cell units and 84 hydrogen installations at March 31, 2022, respectively. Cost of revenue from services performed on fuel cell systems and related infrastructure for the three months ended March 31, 2023 decreased 11.9%, or $1.7 million, to $12.2 million, compared to $13.9 million for the three months ended March 31, 2022. Gross loss decreased to (34.3%) for the three months ended March 31, 2023, compared to (68.4%) for the three months ended March 31, 2022. The decrease in cost of revenue and improvement in gross loss are both due primarily due to cost down and quality related initiatives.

*Cost of revenue – provision for loss contracts related to service.* The Company also recorded a provision for loss contracts related to service of $6.9 million for the three months ended March 31, 2023, compared to $2.1 million for the three months ended March 31, 2022, related primarily to new service contracts entered into during the first quarter of 2023.

*Cost of revenue – Power Purchase Agreements.* Cost of revenue from PPAs includes depreciation of assets utilized and service costs to fulfill PPA obligations and interest costs associated with certain financial institutions for leased equipment. At March 31, 2023, there were 117 GenKey sites associated with PPAs, as compared to 77 at March 31, 2022. Cost of revenue from PPAs for the three months ended March 31, 2023 increased 47.4%, or $15.1 million, to $46.8 million from $31.8 million for the three months ended March 31, 2022 due to the increase in units and sites under PPA contract as well as increased freight costs. Gross loss increased to (489.8%) for the three months ended March 31, 2023, as compared to (216.4%) for the three months ended March 31, 2022 primarily due to the provision for common stock warrants of $7.2 million for the three months ended March 31, 2023 compared to $1.0 million for the three months ended March 31, 2022.

*Cost of revenue – fuel delivered to customers and related equipment*. Cost of revenue from fuel delivered to customers and related equipment represents the purchase of hydrogen from suppliers that ultimately is sold to customers and costs for onsite generation. Cost of revenue from fuel delivered to customers for the three months ended March 31, 2023 increased 38.8%, or $15.2 million, to $54.5 million from $39.3 million for the three months ended March 31, 2022. The increase was primarily due to higher volume of hydrogen delivered to customer sites as a result of an increase in the number of hydrogen installations completed under GenKey agreements, inefficiencies in fueling systems and higher fuel costs. The gross loss increased to (437.4%) during the three months ended March 31, 2023, compared to (192.5%) during the three months ended March 31, 2022, primarily due to the increase in cost of revenue described above, as well as a reduction of revenue resulting from an increase in the provision for common stock warrants of $6.2 million and $0.7 million for the three months ended March 31, 2023 and 2022, respectively.

### Expenses

*Research and development expense.* Research and development (“R&D”) expense includes: materials to build development and prototype units, cash and non-cash stock-based compensation and benefits for the engineering and related staff, expenses for contract engineers, fees paid to consultants for services provided, materials and supplies consumed, facility related costs such as computer and network services, and other general overhead costs associated with our research and development activities.

Research and development expense for the three months ended March 31, 2023 increased $6.1 million, or 29.7%, to $26.5 million, from $20.5 million for the three months ended March 31, 2022. The overall growth in R&D investment is commensurate with the Company’s future expansion into new markets, new product lines, acquisitions and varied vertical integrations.

*Selling, general and administrative expenses.* Selling, general and administrative expenses includes cash and non-cash stock-based compensation, benefits, amortization of intangible assets and related costs in support of our general corporate functions, including general management, finance and accounting, human resources, selling and marketing, information technology and legal services.

Selling, general and administrative expenses for the three months ended March 31, 2023, increased $23.1 million, or 28.6%, to $104.0 million from $80.9 million for the three months ended March 31, 2022. This increase was primarily related to increased headcount, which resulted in increased salaries and stock-based compensation.

*Contingent consideration.* The fair value of the contingent consideration is related to earnouts for the Giner ELX, Inc., United Hydrogen Group Inc., Frames, Applied Cryo and Joule acquisitions. The change in fair value for the three months ended March 31, 2023 was $8.8 million, primarily due to the passage of time and settlement of the Applied Cryo earnout, which is expected to be paid in the second quarter of 2023.

*Interest income*. Interest income primarily consists of income generated by our investment holdings, restricted cash escrow accounts, and money market accounts. Interest income for the three months ended March 31, 2023 increased $15.6 million, as compared to the three months ended March 31, 2022. The increase was primarily related to the increase in interest rates during 2023.

*Interest expense.* Interest expense consists of interest expense related to our long-term debt, convertible senior notes, obligations under finance leases and our finance obligations. Interest expense for the three months ended March 31, 2023 increased $2.0 million compared to the three months ended March 31, 2022, primarily related to a decrease in capitalized interest, offset by an increase in finance obligations.

*Realized loss on investments, net.* Realized loss on investments, net consists of the sales related to available-for-sale debt securities. For the three months ended March 31, 2022, the Company had a loss of $0.8 million of net realized loss on investments, compared to $0 for the three months ended March 31, 2023.

*Change in fair value of equity securities*. The change in fair value of equity securities improved $10.2 million for the three months ended March 31, 2023 from March 31, 2022.

*Loss on equity method investments.* Loss on equity method investments consists of our interest in HyVia, which is our 50/50 joint venture with Renault, AccionaPlug S.L., which is our 50/50 joint venture with Acciona, and SK Plug Hyverse, which is our 49/51 joint venture with SK E&S. For the three months ended March 31, 2023, the Company recorded a loss of $5.3 million on equity method investments. These losses are driven from the start-up activities for commercial and production operations.

### Income Taxes

The Company recorded $1.3 million and $0.4 million of income tax benefit for the three months ended March 31, 2023 and 2022, respectively. The Company has not changed its overall conclusion with respect to the need for a valuation allowance against its domestic net deferred tax assets, which remain fully reserved.

The domestic net deferred tax asset generated from the Company’s net operating loss has been offset by a full valuation allowance because it is more likely than not that the tax benefits of the net operating loss carry forward will not be realized. The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as a component of income tax expense.

### Liquidity and Capital Resources

### Liquidity

As of March 31, 2023 and December 31, 2022, the Company had $474.9 million and $690.6 million, respectively of cash and cash equivalents and $898.4 million and $858.7 million of restricted cash, respectively. Additionally, the Company had $1.0 billion and $1.3 billion of available-for-sale securities as of March 31, 2023 and December 21, 2022, respectively.

The Company has continued to experience negative cash flows from operations and net losses. The Company incurred net losses of $206.6 million and $156.5 million for the three months ended March 31, 2023 and 2022, respectively, and had an accumulated deficit of $3.3 billion at March 31, 2023.

The net cash used in operating activities for the three months ended March 31, 2023 and 2022 was $276.9 million and $209.9 million, respectively. This increase was primarily due to an increase in spend related to inventory as well as other working capital changes. The Company’s working capital was $2.3 billion as of March 31, 2023, which included unrestricted cash and cash equivalents of $474.9 million. The Company plans to invest a portion of its available cash to expand its current production and manufacturing capacity, construction of hydrogen plants and to fund strategic acquisitions and partnerships and capital projects. Future use of the Company’s funds is discretionary and the Company believes that its working capital and cash position will be sufficient to fund its operations for at least one year after the date the financial statements are issued.

The net cash provided by investing activities for the three months ended March 31, 2023 and 2022 was $95.8 million and $273.9 million, respectively. This decrease was due to a reduction of proceeds from available-for-sale securities compared to the prior year, partially offset by an increase of capital spending. Included in purchases of property, plant and equipment and outflows associated with materials, labor, and overhead are costs necessary to construct new leased property. Cash outflows related to equipment that we lease directly to customers are included in net cash used in investing activities.

The net cash provided by financing activities for the three months ended March 31, 2023 was $7.2 million compared to net cash used in financing activities for the three months ended March 31, 2022 of $18.2 million. The change was primarily driven by lower principal payments of long-term debt compared to the prior year due to decreased outstanding principal debt balances.

The Company’s significant obligations consisted of the following as of March 31, 2023:

(i) Operating and finance leases totaling $327.8 million and $48.0 million, respectively, of which $52.9 million and $8.6 million, respectively, are due within the next 12 months. These leases are primarily related to sale/leaseback agreements entered into with various financial institutions to facilitate the Company’s commercial transactions with key customers.

(ii) Finance obligations totaling $342.8 million, of which approximately $63.4 million is due within the next 12 months. Finance obligations consist primarily of debt associated with the sale of future revenues and failed sale/leaseback transactions.

(iii) Convertible senior notes totaling $194.3 million at March 31, 2023.

### Public and Private Offerings of Equity and Debt

#### Common Stock Issuances

In February 2021, the Company sold 54,966,188 shares of its common stock to a subsidiary of SK Holdings at a purchase price of $29.2893 per share, or an aggregate purchase price of approximately $1.6 billion.

In January and February 2021, the Company issued and sold in a registered equity offering an aggregate of 32,200,000 million shares of its common stock at a purchase price of $65.00 per share for net proceeds of approximately $2.0 billion.

In November 2020, the Company issued and sold in a registered direct offering an aggregate of 43,700,000 shares of its common stock at a purchase price of $22.25 per share for net proceeds of approximately $927.3 million.

In August 2020, the Company issued and sold in a registered direct offering an aggregate of 35,276,250 shares of its common stock at a purchase price of $10.25 per share for net proceeds of approximately $344.4 million.

#### Convertible Senior Notes

In May 2020, the Company issued $212.5 million in aggregate principal amount of 3.75% Convertible Senior Notes. The total net proceeds from this offering, after deducting costs of the issuance, were $205.1 million. The Company used $90.2 million of the net proceeds from the offering of the 3.75% Convertible Senior Notes to repurchase $66.3 million of the $100 million in aggregate principal amount of the 5.5% Convertible Senior Notes. In addition, the Company used approximately $16.3 million of the net proceeds from the offering of the 3.75% Convertible Senior Notes to enter into privately negotiated capped called transactions. In the fourth quarter of 2020, $33.5 million of the remaining 5.5% Convertible Senior Notes were converted into 14.6 million shares of common stock, resulting in a gain of approximately $4.5 million which was recorded on the consolidated statement of operations on the gain (loss) on extinguishment of debt line. As of December 31, 2020, approximately $0.2 million aggregate principal amount of the 5.5% Convertible Senior Notes remained outstanding, all of which were converted to common stock in January 2021.

### Secured Debt

In March 2019, the Company entered into a loan and security agreement, as amended, with Generate Lending, LLC, providing for a secured term loan facility in the amount of $100 million (the “Term Loan Facility”). In December 2022, the Company fully repaid the outstanding balance of the Term Loan Facility.

In June 2020, the Company acquired debt as part of its acquisition of United Hydrogen Group Inc. The outstanding carrying value of the debt was $9.0 million as of March 31, 2023. The outstanding principal on the debt was $11.1 million and the unamortized debt discount was $2.1 million, bearing varying interest rates ranging from 2.2% to 8.3%. The debt is scheduled to mature in 2026. As of March 31, 2023, the principal balance indicated below was due at each of the following dates as follows (in thousands):

| ​ | ​ ​ |
| --- | --- |
| December 31, 2023 | $5,660 |
| December 31, 2024 | **​** 3,357 |
| December 31, 2025 | **​** 1,200 |
| December 31, 2026 | **​** 900 |
| ​ | $11,117 |

### 3.75% Convertible Senior Notes

On May 18, 2020, the Company issued $200.0 million in aggregate principal amount of 3.75% Convertible Senior Notes due June 1, 2025, in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act. On May 29, 2020, the Company issued an additional $12.5 million in aggregate principal amount of 3.75% Convertible Senior Notes. During the three months ended March 31, 2023, there were no conversions of the 3.75% Convertible Senior Notes.

The 3.75% Convertible Senior Notes consisted of the following (in thousands):

| ​ ​ ​ Principal amounts: | ​ ​ ​ ​ | ​ ​ March 31, 2023 ​ ​ | ​ ​ ​ ​ | ​ ​ December 31, 2022 ​ ​ |
| --- | --- | ---: | --- | ---: |
| Principal | ​ | $197,278 | ​ | $197,278 |
| Unamortized debt issuance costs (1) | ​ | ​ (3,028) | ​ | ​ (3,359) |
| Net carrying amount | ​ | $194,250 | ​ | $193,919 |

1\) Included in the unaudited interim condensed consolidated balance sheets within the 3.75% Convertible Senior Notes, net and amortized over the remaining life of the notes using the effective interest rate method.

The following table summarizes the total interest expense, the amortization of debt issuance costs and the effective interest rate related to the 3.75% Convertible Senior Notes (in thousands, except for the effective interest rate):

| ​ ​ ​ | ​ ​ | ​ ​ March 31, 2023 | ​ ​ | ​ ​ ​ March 31, ​ 2022 |
| --- | --- | --- | --- | --- |
| Interest expense | ​ | $1,849 | ​ | $1,849 |
| Amortization of debt issuance costs | ​ | ​ 331 | ​ | ​ 316 |
| Total | ​ | ​ 2,180 | ​ | ​ 2,165 |
| Effective interest rate | ​ | **​** 4.5% | ​ | ​ 4.5% |

Based on the closing price of the Company’s common stock of $11.72 on March 31, 2023, the if-converted value of the notes was greater than the principal amount. The estimated fair value of the note at March 31, 2023 was approximately $433.6 million. The fair value estimation was primarily based on an active stock exchange trade on March 29, 2023 of the 3.75% Convertible Senior Notes.

### Capped Call

In conjunction with the pricing of the 3.75% Convertible Senior Notes, the Company entered into privately negotiated capped call transactions (the “3.75% Notes Capped Call”) with certain counterparties at a price of $16.2 million. The 3.75% Notes Capped Call covers, subject to anti-dilution adjustments, the aggregate number of shares of the Company’s common stock that underlie the initial 3.75% Convertible Senior Notes and is generally expected to reduce potential dilution to the Company’s common stock upon any conversion of the 3.75% Convertible Senior Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of the converted notes, as the case may be, with such reduction and/or offset subject to a cap based on the cap price. The cap price of the 3.75% Notes Capped Call is initially $6.7560 per share, which represents a premium of approximately 60% over the last then-reported sale price of the Company’s common stock of $4.11 per share on the date of the transaction and is subject to certain adjustments under the terms of the 3.75% Notes Capped Call. The 3.75% Notes Capped Call becomes exercisable if the conversion option is exercised.

The net cost incurred in connection with the 3.75% Notes Capped Call were recorded as a reduction to additional paid-in capital in the unaudited interim condensed consolidated balance sheets. The book value of the 3.75% Notes Capped Call is not remeasured.

### Common Stock Forward

In March 2018, the Company issued $100.0 million in aggregate principal amount of the 5.5% Convertible Senior Notes due on March 15, 2023, in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act, which have been fully repaid. In connection with the issuance of the 5.5% Convertible Senior Notes, the Company entered into a forward stock purchase transaction (the “Common Stock Forward”), pursuant to which the Company agreed to purchase 14,397,906 shares of its common stock for settlement on or about March 15, 2023. On May 18, 2020, the Company amended and extended the maturity of the Common Stock Forward to June 1, 2025. The number of shares of common stock that the Company will ultimately repurchase under the Common Stock Forward is subject to customary anti-dilution adjustments. The Common Stock Forward is subject to early settlement or settlement with alternative consideration in the event of certain corporate transactions.

The net cost incurred in connection with the Common Stock Forward of $27.5 million was recorded as an increase in treasury stock in the unaudited interim condensed consolidated balance sheets. The related shares were accounted for as a repurchase of common stock. The book value of the Common Stock Forward is not remeasured.

There were no shares of common stock settled in connection with the Common Stock Forward during the three months ended March 31, 2023 or during the three months ended March 31, 2022.

### Amazon Transaction Agreement in 2022

On August 24, 2022, the Company and Amazon entered into a Transaction Agreement (the “2022 Transaction Agreement”), under which the Company concurrently issued to Amazon.com NV Investment Holdings LLC, a wholly owned subsidiary of Amazon, a warrant (the “Amazon Warrant”) to acquire up to 16,000,000 shares (the “Amazon Warrant Shares”) of the Company’s common stock, subject to certain vesting events described below. The Company and Amazon entered into the 2022 Transaction Agreement in connection with a concurrent commercial arrangement under which Amazon agreed to purchase hydrogen fuel from the Company through August 24, 2029.

1,000,000 of the Amazon Warrant Shares vested immediately upon issuance of the Amazon Warrant. 15,000,000 of the Amazon Warrant Shares will vest in multiple tranches over the 7-year term of the Amazon Warrant based on payments made to the Company directly by Amazon or its affiliates, or indirectly through third parties, with 15,000,000 of the Amazon Warrant Shares fully vesting if Amazon-related payments of $2.1 billion are made in the aggregate. The exercise price for the first 9,000,000 Amazon Warrant Shares is $22.9841 per share and the fair value on the grant date was $20.36. The exercise price for the remaining 7,000,000 Amazon Warrant Shares will be an amount per share equal to 90% of the 30-day volume weighted average share price of the Company’s common stock as of the final vesting event that results in full vesting of the first 9,000,000 Amazon Warrant Shares. The Amazon Warrant is exercisable through August 24, 2029.

Upon the consummation of certain change of control transactions (as defined in the applicable warrant) prior to the vesting of at least 60% of the aggregate Amazon Warrant Shares, the Amazon Warrant will automatically vest and become exercisable with respect to an additional number of Amazon Warrant Shares such that 60% of the aggregate Amazon Warrant Shares shall have vested. If a change of control transaction is consummated after the vesting of at least 60% of the aggregate Amazon Warrant Shares, then no acceleration of vesting will occur with respect to any of the unvested Amazon Warrant Shares as a result of the transaction. The exercise price and the Amazon Warrant Shares issuable upon exercise of the Amazon Warrant are subject to customary antidilution adjustments.

At March 31, 2023, 1,000,000 of the Amazon Warrant Shares issued pursuant to the 2022 Transaction Agreement had vested upon issuance. The warrant charge associated with the vested shares of $20.4 million was capitalized to contract assets in our condensed consolidated unaudited interim financial statements based on the grant date fair value and is subsequently amortized ratably as a reduction to revenue based on the Company’s estimate of revenue over the term of the agreement. The grant date fair value of tranches 2 and 3 will also be amortized ratably as a reduction to revenue based on the Company’s estimate of revenue over the term of the agreement. Because the exercise price has yet to be determined, the fair value of tranche 4 will be remeasured at each reporting period end and amortized ratably as a reduction to revenue based on the Company’s estimate of revenue over the term of the agreement. The total amount of provision for common stock warrants recorded as a reduction of revenue for the Amazon Warrant during the three months ended March 31, 2023 was $1.1 million.

The assumptions used to calculate the valuations as of August 24, 2022 and March 31, 2023 are as follows:

| ​ ​ ​ | ​ ​ | ​ Tranches 1-3 August 24, 2022 | ​ ​ | ​ Tranche 4 March 31, 2023 |
| --- | --- | ---: | --- | ---: |
| Risk-free interest rate | ​ | 3.15% | ​ | 3.50% |
| Volatility | ​ | 75.00% | ​ | 75.00% |
| Expected average term | ​ | 7 years | ​ | 4 years |
| Exercise price | ​ | $22.98 | ​ | $10.55 |
| Stock price | ​ | $20.36 | ​ | $11.72 |

### Amazon Transaction Agreement in 2017

On April 4, 2017, the Company and Amazon entered into a Transaction Agreement (the “2017 Amazon Transaction Agreement”), pursuant to which the Company agreed to issue to Amazon.com NV Investment Holdings LLC, a warrant to acquire up to 55,286,696 Amazon Warrant Shares, subject to certain vesting events described below. The Company and Amazon entered into the 2017 Amazon Transaction Agreement in connection with existing commercial agreements between the Company and Amazon with respect to the deployment of the Company’s GenKey fuel cell technology at Amazon distribution centers. The vesting of the Amazon Warrant Shares was conditioned upon payments made by Amazon or its affiliates (directly or indirectly through third parties) pursuant to the existing commercial agreements. At December 31, 2021, all 55,286,696 of the Amazon Warrant Shares had vested.

The warrant had been exercised with respect to 27,600,000 and 24,704,450 shares of the Company’s common stock as of March 31, 2023 and December 31, 2022, respectively.

### Walmart Transaction Agreement

On July 20, 2017, the Company and Walmart entered into a Transaction Agreement (the “Walmart Transaction Agreement”), pursuant to which the Company agreed to issue to Walmart a warrant (the “Walmart Warrant”) to acquire up to 55,286,696 shares of the Company’s common stock, subject to certain vesting events (the “Walmart Warrant Shares”). The Company and Walmart entered into the Walmart Transaction Agreement in connection with existing commercial agreements between the Company and Walmart with respect to the deployment of the Company’s GenKey fuel cell technology across various Walmart distribution centers. The existing commercial agreements contemplate, but do not guarantee, future purchase orders for the Company’s fuel cell technology. The vesting of the warrant shares was conditioned upon payments made by Walmart or its affiliates (directly or indirectly through third parties) pursuant to transactions entered into after January 1, 2017 under existing commercial agreements.

The warrant had been exercised with respect to 13,094,217 shares of the Company’s common stock as of March 31, 2023 and December 31, 2022.

At March 31, 2023 and December 31, 2022, 27,643,347 of the Walmart Warrant Shares had vested. The total amount of provision for common stock warrants recorded as a reduction of revenue for the Walmart Warrant during the three months ended March 31, 2023 and 2022 was $12.9 million and $1.7 million, respectively. During the three months ended March 31, 2023 and 2022, there were no exercises with respect to the Walmart Warrant.

The assumptions used to calculate the valuations of the final tranche of the Walmart Warrant as of March 31, 2023 are as follows:

| ​ ​ | ​ | ​ March 31, 2023 |
| --- | --- | ---: |
| Risk-free interest rate | ​ | 3.55% |
| Volatility | ​ | 75.00% |
| Expected average term | ​ | 3.5 years |
| Exercise price | ​ | $10.55 |
| Stock price | ​ | $11.72 |

### Operating and Finance Lease Liabilities

As of March 31, 2023, the Company had operating leases, as lessee, primarily associated with sale/leaseback transactions that are partially secured by restricted cash, security deposits and pledged escrows (see also Note 1, “Nature of Operations”) as summarized below. These leases expire over the next one to nine years. Minimum rent payments under operating leases are recognized on a straight-line basis over the term of the lease.

Leases contain termination clauses with associated penalties, the amount of which cause the likelihood of cancellation to be remote. At the end of the lease term, the leased assets may be returned to the lessor by the Company, the Company may negotiate with the lessor to purchase the assets at fair market value, or the Company may negotiate with the lessor to renew the lease at market rental rates. No residual value guarantees are contained in the leases. No financial covenants are contained within the lease; however, the lease contains customary operational covenants such as the requirement that the Company properly maintain the leased assets and carry appropriate insurance. The leases include credit support in the form of either cash, collateral or letters of credit. See Note 19, “Commitments and Contingencies” for a description of cash held as security associated with the leases.

The Company has finance leases associated with its property and equipment in Latham, New York and at fueling customer locations. The fair value of this finance obligation approximated the carrying value as of March 31, 2023.

### Finance Obligation

The Company has sold future services to be performed associated with certain sale/leaseback transactions and recorded the balance as a finance obligation. The outstanding balance of this obligation at March 31, 2023 was $324.9 million, $59.9 million and $265.0 million of which was classified as short-term and long-term, respectively, on the accompanying unaudited interim condensed consolidated balance sheet. The outstanding balance of this obligation at December 31, 2022 was $312.1 million, $55.4 million and $256.6 million of which was classified as short-term and long-term, respectively. The amount is amortized using the effective interest method. Interest expense recorded related to finance obligations for the three months ended March 31, 2023 and 2022 was $9.2 million and $6.7 million, respectively. The fair value of this finance obligation approximated the carrying value as of March 31, 2023 and December 31, 2022.

In prior periods, the Company entered into sale/leaseback transactions that were accounted for as financing transactions and reported as part of finance obligations. The outstanding balance of finance obligations related to sale/leaseback transactions at March 31, 2023 was $17.9 million, $3.5 million and $14.4 million of which was classified as short-term and long-term, respectively on the accompanying consolidated balance sheet. The outstanding balance of this obligation at December 31, 2022 was $17.2 million, $3.5 million and $13.7 million of which was classified as short-term and long-term, respectively on the accompanying consolidated balance sheets. The fair value of this finance obligation approximated the carrying value as of March 31, 2023 and December 31, 2022.

### Restricted Cash

In connection with certain of the above noted sale/leaseback agreements, cash of $445.2 million and $383.7 million was required to be restricted as security as of March 31, 2023 and December 31, 2022, respectively, which restricted cash will be released over the lease term. As of March 31, 2023 and December 31, 2022, the Company also had certain letters of credit backed by security deposits totaling $340.5 million and $379.6 million, respectively, that are security for the above noted sale/leaseback agreements. As of March 31, 2023, the Company also had certain customer and customs related letters of credit totaling $22.7 million.

As of both March 31, 2023 and December 31, 2022, the Company had $75.5 million held in escrow related to the construction of certain hydrogen plants.

The Company also had $5.0 million, $1.2 million, and $1.8 million of consideration held by our paying agent in connection with the Applied Cryo, Joule, and CIS acquisitions, respectively, reported as restricted cash as of March 31, 2023, with a corresponding accrued liability on the Company’s unaudited interim condensed consolidated balance sheet. Additionally, the Company had $6.5 million and $10.8 million in restricted cash as collateral resulting from the Frames acquisition as of March 31, 2023 and December 31, 2022, respectively.

### Investments

Our investment portfolio, including cash and cash equivalents, totaled $1.6 billion at March 31, 2023. Purchases of fixed maturity securities are classified as available-for-sale at the time of purchase based on individual security.

The composition of our investment portfolio, including cash and cash equivalents, as of March 31, 2023, is shown in the following table (in thousands):

| ​ ​ ​ Fixed maturity securities - available-for-sale | ​ ​ ​ | ​ ​ Carrying Amount ​ ​ | ​ ​ ​ | ​ Percentage of Portfolio ​ |
| --- | --- | ---: | --- | ---: |
| U.S. Treasuries | ​ | $864,508 | ​ | 52.6% |
| Corporate bonds | ​ | ​ 163,863 | ​ | 10.0% |
| **Total fixed maturity securities - available-for-sale** | **​** | $1,028,371 | ​ | 62.6% |
| Equity securities | ​ | ​ 139,911 | ​ | 8.5% |
| Cash and cash equivalents | ​ | ​ 474,861 | ​ | 28.9% |
| **Total investments, including cash and cash equivalents** | **​** | $1,643,143 | ​ | 100.0% |

### Extended Maintenance Contracts

On a quarterly basis, we evaluate any potential losses related to our extended maintenance contracts for fuel cell systems and related infrastructure that have been sold. The following table shows the rollforward of balance in the accrual for loss contracts, including changes due to the provision for loss accrual, loss accrual from acquisition, releases to service cost of sales, and releases due to the provision for warrants (in thousands):

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ Three months ended March 31, 2023 | ​ ​ ​ | ​ ​ Year ended December 31, 2022 |
| --- | --- | --- | --- | --- |
| Beginning balance | ​ | $81,066 | ​ | $89,773 |
| Provision for loss accrual | ​ | ​ 6,981 | ​ | ​ 23,295 |
| Releases to service cost of sales | ​ | **​** (6,668) | ​ | ​ (35,446) |
| Increase/(decrease) to loss accrual related to customer warrants | ​ | **​** (92) | ​ | ​ 3,506 |
| Foreign currency translation adjustment | ​ | **​** 25 | ​ | ​ (62) |
| Ending balance | ​ | $81,312 | ​ | $81,066 |

### Critical Accounting Estimates

Management’s discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of and during the reporting period. On an on-going basis, we evaluate our estimates and judgments, including those related to revenue recognition, valuation of long-lived assets, accrual for service loss contracts and common stock warrants. We base our estimates and judgments on historical experience and on various other factors and assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about (1) the carrying values of assets and liabilities and (2) the amount of revenue and expenses realized that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

There have been no changes in our critical accounting estimates from those reported in our 2022 Form 10-K.

### Recent Accounting Pronouncements

#### Recently Adopted Accounting Guidance

Other than the adoption of the accounting guidance mentioned in our 2022 Form 10-K, there have been no other significant changes in our reported financial position or results of operations and cash flows resulting from the adoption of new accounting pronouncements.

#### Recent Accounting Guidance Not Yet Effective

All issued but not yet effective accounting and reporting standards as of March 31, 2023 are either not applicable to the Company or are not expected to have a material impact on the Company.

## Market risk

As filed, 191 characters.

There has been no material change from the information provided in the Company’s 2022 Form 10-K under the section titled “Item 7A: Quantitative and Qualitative Disclosures About Market Risk.”

## Controls and procedures

As filed, 1,592 characters.

### Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports that we file or submit under the Exchange Act, are recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal financial officer) as appropriate, to allow for timely decisions regarding required disclosure.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of March 31, 2023. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of March 31, 2023, our disclosure controls and procedures were not effective because of material weaknesses in internal control over financial reporting described in Part II, Item 9A “Controls and Procedures” of our 2022 Form 10-K. The material weaknesses have not been remediated as of March 31, 2023.

### Changes in Internal Control over Financial Reporting

There were no changes during the quarter ended March 31, 2023 in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 9,613 characters.

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors that could materially affect the Company’s business, financial condition or future results discussed in the Company’s 2022 Form 10-K in Part I, Item 1A. “Risk Factors.” The risks described in the 2022 Form 10-K are not the only risks that could affect the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition and/or operating results in the future. As a supplement to the risk factors identified in the 2022 Form 10-K, below we have set forth updated risk factors. Other than as provided below, there have been no material changes to our risk factors since December 31, 2022.

***We are dependent on information technology in our operations and the failure of such technology may adversely affect our business. Security breaches of our information technology systems, including cyber-attacks, ransomware attacks, or use of malware or phishing or other malicious techniques by threat actors, could lead to liability, could impact our operations, or could damage our reputation and financial results.***

We have in the past and may in the future experience problems with the operation of our current information technology systems or the technology systems of third parties on which we rely, as well as the development and deployment of new information technology systems, that could adversely affect, or even temporarily disrupt, all or a portion of our operations until resolved. The inability to implement new systems or delays in implementing new information technology systems may also affect our ability to realize projected or expected cost savings. Additionally, the inability to implement or delays in implementing new security measures can also affect our ability to protect against increasingly sophisticated threat actors. Any systems failures could impede our ability to timely collect and report financial results in accordance with applicable laws.

Information technology system and/or network disruptions could harm the Company’s operations. Failure to effectively prevent, detect, and recover from security compromises or breaches, including cyber-attacks, could result in the misuse of company assets, unauthorized use or publication of our trade secrets and confidential business information, disruption to the company, diversion of management resources, regulatory inquiries, legal claims or proceedings, reputational damage, loss of sales, reduction in value of our investment in research and development, among other costs to the company. We have experienced and may continue to experience both successful and unsuccessful attempts to gain unauthorized access to our information technology systems on which we maintain proprietary and confidential information. For example, in or around March 2023, an unauthorized actor accessed our computer network and executed a ransomware attack, resulting in the encryption of certain of our computer systems, including systems used to store proprietary and confidential data, and exfiltration of limited data sets. Upon detection, we took immediate steps to contain, assess and remediate the incident, including engaging outside legal counsel and external forensic investigators. As of the date of the filing of this Quarterly Report on Form 10-Q, we have restored the affected systems and throughout this restoration period our business remained fully operational with no material disruption. Based on information available to date, we do not believe the ransomware event has had a material impact on our business. However, as a result of the incident, we have incurred costs in addressing the incident, including costs related to investigation, containment, restoration, and remediation.

The risk of a security compromise, breach, or disruption, particularly through cyber-attacks, or cyber intrusion, including by computer hackers, insider threats, and cyber terrorists, has generally increased as cyber-attacks have become more prevalent and harder to detect and fight against and threat actors continue to become more sophisticated in their malicious techniques. Additionally, outside or unauthorized parties may attempt to access our confidential information through other means, for example by fraudulently inducing our employees to disclose confidential information through phishing emails or deceptive advertising campaigns. We actively seek to prevent, detect, and investigate any unauthorized access. These threats are also continually evolving, and as a result, will become increasingly difficult to detect. In addition, as a result of the COVID-19 pandemic, the increased prevalence of employees working from home may exacerbate the aforementioned cybersecurity risks. Despite the implementation of network security measures, our information technology system have been and could be penetrated by outside or unauthorized parties. Going forward, we may expend additional resources, expenses, and legal and professional fees to further enhance the security of our information technology systems and continually assess our current security measures. In addition, we may be subject to governmental investigations, enforcement actions, regulatory fines or litigation, or we may suffer from reputational damage or public statements against us as a result of unauthorized access to our information technology systems.

***Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults, or non-performance by financial institutions or transactional counterparties, could adversely affect our business, financial condition and results of operations.***

Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems. For example, the recent closures of Silicon Valley Bank, Signature Bank and Silvergate Capital Corp. led to disruption and volatility, and erosion of customer confidence, in the banking system, including deposit outflows, at many mid-sized banks, increasing the need for liquidity. Further, uncertainty remains over liquidity concerns in the broader financial services industry. For example, Credit Suisse recently agreed to be acquired by UBS following the intervention of the Swiss Federal Department of Finance, the Swiss National Bank and the Swiss Financial Market Supervisory Authority, and it was recently announced that JPMorgan Chase Bank, National Association would assume all of First Republic Bank’s deposits and substantially all of its assets.

Although a statement by the Department of the Treasury, the Federal Reserve and the FDIC indicated that all depositors of SVB would have access to all of their money after only one business day of closure, including funds held in uninsured deposit accounts, it is not clear that the Federal Reserve or the FDIC will treat future bank failures similarly. We maintain deposits at financial institutions as a part of doing business that could be at risk if another similar event were to occur. Our ongoing cash management strategy is to maintain the majority of our deposit accounts in large financial institutions, but there can be no assurance this strategy will be successful. In addition, bank failures and bailouts and their potential broader effects and potential systemic risk on the global banking sector generally and its participants may adversely affect our business more generally. If any of our customers, suppliers or other parties with whom we conduct business are unable to access funds pursuant to instruments or lending arrangements with such a financial institution or if any of our customers, suppliers or other parties with whom we conduct business declare bankruptcy or insolvency, such parties’ ability to pay their obligations to us or to enter into new commercial arrangements requiring additional payments to us could be adversely affected. For example, a leaseholder bank for one of our sale leaseback transactions was recently placed in receivership and, while this did not have a material impact on our financial condition or results of operations, it could limit our access to proceeds from the transaction.

In addition, any decline in available funding or access to our cash and liquidity resources could, among other risks, limit our ability to meet our capital needs and fund future growth or fulfill our other obligations, or result in breaches of our financial and/or contractual obligations. Investor concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, including the corporate bond market, thereby making it more difficult for us to acquire financing on acceptable terms or at all. Any of these impacts, or any other impacts resulting from the factors described above or other related or similar factors not described above, could have material adverse impacts on our business, financial condition and results of operations.

Filed May 9, 2023.
Source: SEC EDGAR, the filing index for accession 0001558370-23-008801. Last ingested by Listed: Oct 24, 2026, 15:02 ET. No prices; not investment advice.